Boeing’s CEO, Kelly Ortberg, blasts “bloated management ranks, wasteful spending and a culture of infighting and shirking responsibility.” Rohit Manocha, TGI Fridays’ executive chairman, cites COVID-19 and “our capital structure” for bankruptcy. Carlos Tavares resigns as CEO of Chrysler owner, Stellantis, amid loss of market share and plummeting stock price. And, closer to home, when Kohl’s former CEO Tom Kingsbury stepped down earlier this year after two and a half years, he acknowledged “abysmal results.”
We have been reading about these kinds of failures for years. Certainly, these significant missteps are not limited to publicly traded companies. We just get to see the big public blunders because publicly traded companies are required to report results. The same sad story plays out regularly with privately held companies as well.
What happens to the companies that went from great to not so good? How did the CEOs in charge allow this to occur on their watch? And, perhaps more importantly, what are CEOs to do to mitigate the chances of becoming one of the negative statistics?
While far from a complete list with obvious exceptions, here are a few suggestions from Spotify’s Nir Zicherman.
Thinking you have all the answers. 90% of a CEO’s assumptions are incorrect. The problem is the CEO may not know which 90%. Zicherman suggests the CEO do everything possible to challenge his or her convictions and be willing to shed or tweak them when necessary.
Focusing too much on short-term gains. According to Zicherman, short-term wins offer little beyond dopamine hits that stroke the ego. It is better to consider many short-term wins as incremental achievements leading to the true goal. It is a marathon, not a sprint.
The complacency trap. In their book “The Life Cycle of a CEO,” Claud Hildebrand and Bob Stark note that in years six to 10 of their tenure, successful CEOs begin to believe their own press, not realizing that the problems that exist are problems they helped create. Their advice? Stay humble and be willing to question previous decisions.
Bill Ackman, billionaire CEO of hedge fund Pershing Square, adds these potential pitfalls as businesses become too dominant and reliably profitable.
- CEOs get lazy
- Businesses get inefficient
- Bureaucracy grows
- Boards become comfortable
- Shareholders aren’t paying attention
- The CEO spends more time on the golf course
- Companies don’t hire the right people
- They lose their way
Focusing too much on new customers. New markets and new customers tend to look like greener pastures. It looks like more fun. More opportunity. Neglecting current customers, however, causes unnecessary and costly churn. Retaining an existing customer is significantly less expensive than the cost of obtaining a new one. The costs and risks of entering a new market are often understated.
Focusing too much on existing customers. Focus on current customers is critical. But focusing only on existing customer needs, according to Zicherman, sacrifices potential markets and customers yet to be reached or even identified. This “push and pull” of market and product development has humbled even seasoned CEOs. Awareness of the potential out-of-balance bias between existing and new customers is constructive.
Avoiding difficult conversations. While most CEOs are aware of the benefit of healthy conflict within the organization, avoiding conflict – particularly relating to people issues – is treacherous territory. CEOs are human. They want to be liked just like the next guy. There is no slack to cut, however, when it comes to the chief executive. Difficult conversations are part of the job description.
Focus on vanity metrics. “There is a reason they are called vanity metrics,” said Zickerman. Accomplishing a goal that looks good but doesn’t align strategically creates the illusion of success. A better option is identifying your desired outcomes and then creating metrics that lead to long-term success.
To paraphrase Inspector Harry Callahan, a successful CEO has got to know his or her limitations. We all have them. They are insidious and dangerous to the health and long-term wellbeing of the business enterprise. Awareness and recognition here are key. Mitigation might be the best we can expect. Or as Stephen Covey put it, “We are limited but we can push back the borders of our
limitations.”
